Lund University
Master programme in Economic History I gave Gold for Iron Prussia’s economic strategies in the context of the War of Liberation Steffen Liedmeyersteffen.liedmeyer.951@student.lu.seAbstract: In 1806 Prussia had to face tremendous economic pressure. In this article an interdisciplinary approach on wartime economy is applied. Controlling for different spheres that influence the economy during wars, the success of the Prussian state in the War of Liberation will be discussed. Prussia’s pre-industrialized status therefore allows observing early measures for taking influence on the economic progress. Social reforms, market dynamics, trading strategies were essential elements of strategies conducted in the recovery process helping Prussia to fight back Napoleon and become a continental Great Power.Key words: Wartime Economy, Crowding Out, Smuggling, Economic StrategiesEKHM51 Master thesis, (15 credits ECTS)June 2014 Supervisor: Patrick SvenssonExaminer: Anders ?grenTable of Contents TOC \o "1-3" \h \z \u List of Abbreviations PAGEREF _Toc389070484 \h IIList of Figures PAGEREF _Toc389070485 \h III1 Introduction PAGEREF _Toc389070486 \h 11.1 Theory on Wartime Economy PAGEREF _Toc389070487 \h 21.2 Aim, Analytical Framework and Research Questions PAGEREF _Toc389070488 \h 41.3 Sources, Method and Data PAGEREF _Toc389070489 \h 62 Historical Background PAGEREF _Toc389070490 \h 103 The Cope Economy PAGEREF _Toc389070491 \h 133.1 Living Conditions in Prussia PAGEREF _Toc389070492 \h 133.2 The Revolution From Above PAGEREF _Toc389070493 \h 143.3 Negative Policy Integration and Market Dynamics PAGEREF _Toc389070494 \h 184 The shadow economy PAGEREF _Toc389070495 \h 234.1 The Concept of Illicit Trade PAGEREF _Toc389070496 \h 234.2 Maritime Trade in the Baltic Sea PAGEREF _Toc389070497 \h 254.3 Sweden as Intermediary PAGEREF _Toc389070498 \h 295 The war economy PAGEREF _Toc389070499 \h 345.1 Financial Strategies PAGEREF _Toc389070500 \h 345.2 The Crowding Out Effect PAGEREF _Toc389070501 \h 376 The Emotional Economy PAGEREF _Toc389070502 \h 406.1 Reform and Restriction based Spirit PAGEREF _Toc389070503 \h 406.2 The emotional Approach PAGEREF _Toc389070504 \h 417 Conclusion PAGEREF _Toc389070505 \h 44ReferencesAppendicesList of Abbreviations1 Rtlr. ? 3.72 Frcs. Rtlr.= Reichstaler (Prussian Currency)Frcs.= Francs (French Currency)---------------------------------------------------------------------------------------------BMA= Bond Market ApproachCf.= Confirmet al.= et aliiFAZ= Frankfurter Allgemeine Zeitungi. a.= inter aliaNYT= New York Timesrbb= Radio Berlin-BrandenburgSTR online= Sound Toll Registers Onlines. v. = sub verbumList of Figures TOC \h \z \c "Figure" Figure 1: Logged Number of ships arriving to Baltic ports, 1786 - 1820 (Source: Own extractions from the STR online) PAGEREF _Toc389306706 \h 25Figure 2: Number of ships from England arriving to Danish and Russian ports, 1808 – 1813 (Source: Own extractions from the STR online) PAGEREF _Toc389306707 \h 28Figure 3: The progress of maritime trade from England to Sweden/ Finland, 1750 – 1850 (Source: Own extractions from the STR online) PAGEREF _Toc389306708 \h 30Figure 4: Number of ships arriving from England to Swedish Ports, 1806 to 1814 (Source: Own extraction from STR online) PAGEREF _Toc389306709 \h 31Figure 5: Number of ships under Swedish colors sailing from England to Sweden, 1750 to 1850 (Own extractions from STR online) PAGEREF _Toc389306710 \h 32 TOC \h \z \c "Table" Table 1: Numbers of Ships arriving from England to Russian and Danish ports, 1810 and 1813 by month PAGEREF _Toc389301227 \h 29 1 Introduction“To my peopleThere is no need of explaining to my loyal subjects or to any German, the reasons for the war which is about to begin. They lie plainly before the eyes of awakened Europe.We succumbed to the superior force of France. The peace which followed deprived me of my people and, far from bringing us blessings, it inflicted upon us deeper wounds than the war itself, sucking out the very marrow of the country. Our principal fortresses remained in the hand of the enemy, and agriculture, as well as the highly developed industries of our towns, was crippled. The freedom of trade was hampered and thereby the sources of commerce and prosperity cut off. The country was left a prey to the ravages of destitution.” (Frederick William III, 17th March 1813)These words Frederick William III. King of Prussia chose to call his people to arms in March 1813. Almost 25 years after the French Revolution the developments in Europe culminated in this emotional declaration. The turn of the 19th century was one of the most dynamic times in modern history. The absolutistic world was hit by the French Revolution which affected the life of thousands. With bourgeois beliefs in Liberté, ?galité and Fraternité keystones of the Ancién Regime were questioned. By criticizing the old world order social tension was caused and inspiration for greater movements created. “In the beginning was Napoleon”, this is how Nipperdey characterizes Europe in the early 19th century.Quickened by ideas of the French Revolution Napoleon managed to run over Europe and spread revolutionary ideas all over the continent. With a new strategy of economic war Napoleon put pressure on Britain and central Europe. The continental system was the first highly effective measure aiming at economic sectors of complete countries. Highlighting the massive impacts in agriculture, industry and freedom of trade Fredrick William directly mentions several economic reasons that are essential for Prussia’s prosperity and thus supports the picture of growing importance and dependency on economy.Since then economic warfare has arrived in international conflicts and is still used in political relationships. Economic restrictions are today’s strategy to weaken countries that act oppositional to common expectations. Especially by having a look on current developments in Ukraine and reactions of the NATO to Russia’s behavior within the last months this can clearly be seen. Sanctions against Russia illustrate the importance of economy in international diplomacy. These developments prove the brisance of this topic. Russia has to deal with financial restrictions and increasing pressure on the economy. In this respect Russia’s situation is closely related to Prussia’s more than 200 years ago. Though Prussia was not an industrialized country in the early 19th century, financial and trading restrictions cut off connections to important trading partners. Accordingly, Prussia had to handle huge economic pressure while trying to reorganize the economy due to the needs within the preparation of the War of Liberation. 1.1 Theory on Wartime EconomyThe theory on wartime economy was already in scientific interest in the early 20th century. Robinson (1900) points out how new conditions have come up in the developments since the 1800s. New governmental structures cause new problems, but also new possibilities to compete among each other. Robinson argues that the connection of economy and politics and by this the use of economy in politics is obvious. With rising importance of industry possibilities to exploit the economic sector for wars rises to the same extent. Beside politics and government Lawrence identifies trade as an important factor in wartime economy. By comparing the circumstances of states that possess international trade to those without the central role of international trade during wars is highlighted. To deal with the absence of trade, however, different measures are identified. Taxation, loans and depreciation of currency are due to Lawrence opportunities to finance growing military consumption. Further the increase of import trade, if possible, is mentioned as a strategy. The controlled use of inflation as a successful strategy, also observed by Shaw and Tarshis, decreases pressure of public debt and after-war deflation. Research focusing on World War II then detects the extensive use of Human Resources as an economic aspect. Spoerer and Stamp stress the use of people to build up wartime economy. This is done by recruiting voluntary workforces as well as using compulsory labor and concentration camps. Stamp states how these measures carried the iron- and arms industry. Spoerer moreover points out that compulsory labor was one important factor to keep up wartime economy. These rather economic and rational aspects in wartime economy got challenged by the concept of wars that are classified according to Kaldor as new wars. Due to this, old wars are said to be rather related to economic greed and interests whereas new wars are settled on spiritual conviction and cultural or religious disparities. The war in Afghanistan is thus discussed to be a new war in which religious and spiritual factors are more important than in the rather economic driven old wars of former times. Though Brandis (1953) pointed out these differences show growing importance of ethics and moral in war economics, Koubi states that the non-economic aspects received less attention than the economic ones. Olson furthermore argues that economic performance in wartime is highly set by political structures and public interest and therefore highlights interdependence between these various factors. This means, a connection between economic, public and social aims can hence be identified. Thus, a range of spheres in economics during wartime can be distinguished, that determines success in modern wars. Accordingly, governmental management efforts measures in economics, public interests and social requirements. These spheres, thus, have to be analyzed while be aware of most essential difference between peace and wartime economy stated by Brandis: “War has one Primary Aim – victory over the enemy.”1.2 Aim, Analytical Framework and Research QuestionsSettled on these theories the aim of this thesis is to analyze and discuss wartime strategies of the Prussian state during the period from 1806 to 1813. This is done by using an analytical framework for wartime economies proposed by Goodhand (2003). The framework consists of four different spheres: cope, shadow, war and emotional economy and is related to the aspects the theories figured out. Consequently, this framework will structure the analysis. Goodhand applies this framework to the situation in Afghanistan (2001). By criticizing that research on African wars merely focuses on greed and thus economic aspects, Goodhand argues for a new analytical framework covering rather widespread elements. The new developed framework is based on the assumption that the situation in Afghanistan is different from those before. Starting as a rather religious motivated war and becoming a resource based economic war the greed model seems to be insufficient for the situation in Afghanistan. Goodhand further argues that the assumption of wars to be merely based on well considered economic calculations ignores the existence of political and emotional elements. Comparable to Brandis it is stated that these factors also influence wartime circumstances. Moreover it is pointed out that the greed model distinguishes illicit and licit activities as being incompatible phenomena. In the new approach, however, illicit activities are not considered as isolated spheres. Rather it is argued that politics could establish institutions and ways to benefit from illicit activities.The framework of Goodhand is based on analytical needs of wartime economic theories and fits furthermore in the Prussian circumstances. Though developed for modern wars and thus new wars the framework of Goodhand allows analyzing the dynamics of the early 19th century. By highlighting interdependence within factors and integrating emotional aspects, this framework assures to capture the dynamics in the Prussia. Especially emotional elements play an important role against Napoleon and the French suppression. Therefore a framework concentrating on modern wars is adequate in discussing the processes of national consciousness and the relation to wartime economics. The national feeling in Prussia got an important aspect for the success of the War of Liberation. Accordingly, the model by Goodhand offers the ideal way to analyze the processes in Prussia adequately. Also the fact that illicit and licit activities are not considered as two isolated spheres supports the adaptability. The assumption that the Prussian state tends to establish illicit activities to prepare the War of Liberation is therefore essential. Due to Lawrence’s theory of measures dealing with absence of trade, illicit trade could be detected in Prussia. The stringent conditions Prussia had to except prevent a sound and efficient preparation only based on licit measures. The thesis will therefore analyze the four spheres of Goodhand’s framework in Prussia’s economy by discussing the following research questions:In terms of the cope economy referring to the main population that is affected by war this thesis will focus on how did the Prussian state integrate the population in the economic strategy and to which extent this economic strategy was implemented actively or rather based on opportunism. By analyzing contemporary letters and documents combined with a review of the current research, these questions will be analyzed. The interdependence of politics, economy and social challenges detected by Olson emphasizes the importance of this relationship.The shadow economy relating to the part of the economic sphere that is rather illicit or illegitimate will be attended by how the continental system affected the Prussian economy and to what extent this created new and illicit strategies. This directly is based on Lawrence’s assumptions and will be analyzed by extracting data on maritime trade in the Baltic Sea from the Soundtoll Register database. The war economic sector considers the financial aspects of the Prussian state. It will therefore be analyzed discussing the questions how Prussia tried to strengthen the state’s finances and did Prussia run into a crowding out effect. The research results for crowding out in Great Britain by Mokyr and Clark in the Industrial Revolution will be taken as a reflection for the circumstances in Prussia within these years.Finally there will be a look at the emotional economy facing the question how Prussia tried to integrate the whole population and created a national spirit all over the country. For this different approaches will be presented and discussed by statements of the population during the preparations for the War of Liberation. Moreover a call of the Princesses of Prussia will be analyzed relating to the creation of national spirit. A discussion and a conclusion will follow these paragraphs giving an overview of the results and further research challenges. 1.3 Sources, Method and Data The thesis relies on three different types of sources. Besides findings of previous research on the early 19th century, edited letters from public officers to the King and between them and data of the Soundtoll Registers will be used. Depending on the respective chapter these different sources will be conducted simultaneously. The positions of previous research will therefore be confronted with each other and furthermore challenged by historical statements of public officers as well as controlled by data of the Soundtoll Registers. The combination of these three sources guarantees a discussion of the research questions that considers also the historical view of Prussian officials and bequeathed data of these years. By this, current research gets reflected on the basis of central historical documents. At the same time research that is rather based on Prussia’s history gets confronted with economic theories and concepts regarding investments and markets. Two different scientific fields will thus get combined and analyzed by different types of sources. The validity of concepts that analyze England’s situation in the Industrialization will be challenged by trying to adopt them to Prussia. Consequently an interdisciplinary approach that is also suggested by Koubi gets implemented. Lead by the framework of Goodhand this ensures a widespread foundation focusing on different aspects of wartime strategies. The fundamental changes that happened within these days in political systems, economy and sense of justice embody the conventions of the modern times. The upcoming democratic movement with its convictions of equality and economic comprehension characterize whole continents. Accordingly, these massive changes in the social and economic world caused a lot of interest. Especially the progress of this shift has caused multitude of research. Koselleck published in 1967 a scientific work covering important information about changes and processes from 1807 to 1850 and embodies thus the core research up to the 1970s. Discussing the importance of the reformers Stein and Hardenberg this work got a broad agreement in the research. Koselleck’s argumentation that the reforms are based on pioneering ideas of public officers establishes the fundament of the classic view. However, since the 1970s this view of the developments including the predominant role of reformers in the economic progress throughout the 19th century in Prussia was questioned. In consequence Kopsidis argues particularly economic upswing throughout the 19th century to be no result of reforms, but a consequence of the economic developments starting already in the 1790s that lead to increased market integration. Hence the focus was shifted from innovative officers to market integration processes pushing the reformers in a rather reacting role. Focusing on economic issues in general the works of Heinrich, Büsch and Neugebauer are the most central ones taking care of economics and finances in Prussia. However, Treue argues that these works are not very detailed to economic history and rather focusing on the states and reforms. Accordingly, a complete work on economic history has first been published in 1984 by Treue. Together with Vogel and to some extent Clark these are the main research publications discussing of economic history in Prussia. Vogel deals especially with the years from 1807 to 1822 highlighting the relation of the reforms by Stein and Hardenberg and resulting economic effects. The research on economic warfare in the present got consistently more important. Focusing on current conflicts in Afghanistan, big European and World Wars or economic circumstances in African countries, the focus is rather on modern wars. Naturally, the role of the economy in wars rose in the past, since the influence of international trade and economy increased. A research paper directly addressing strategies of Prussia in these years does not exist yet. The theoretical implications of previous research will be discussed in each of the chapters following the structure of the Goodhand framework. As several different theories are introduced, this approach supports the comprehensibility of the line of arguments. However, a similar situation occurs in the availability of data for this time. Conditions comparable to the English one can by far not be presented. Though the statistical office of Prussia was founded in 1805 by Stein, there are no sound data available on which a statistical analysis could be based. Data that was collected within these years cannot be compared to standards of modern data. As it was provided for the ruler to control the country and effect of his measures, most data was gained for this purpose. Ergo the data might be biased and thus not capable for a detailed research. Additionally, the territories of Prussia changed between 1805 and 1807 and again in 1813 dramatically. This, in combination with devastating wars (1806, 1813-1815), affects the quality of data so that most of the general data for Prussia is not reliable. Consequently the data of Mützell (1825) provides some details from 1810 to 1816, but is due to missing standards hardly reliable. Working with information written to the King in letters is, contrarily, less unpredictable and directions of tendency can be determined. This Thesis, thus, will concentrate on working with edited letters of public officers to the King and between each other. Besides this, data to analyze the shadow economy have been extracted from the Soundtoll Registers database. This offers the opportunity to get an impression of maritime trade passing the Sound and by this of how solid the continental system was. For the following analysis hence data especially on respective ports in the Baltic area have been extracted. Based on these information trading connections between England and Baltic harbors will be compared. This procedure could help to detect possible smuggle on these routes. Ascribable to the limitations of the database, however, it is not possible to compare cargo of ships within this period. In consequence, the numbers of ships calling the ports will be analyzed. 2 Historical BackgroundTo get a better impression of the time period the thesis is based on, it is important to be aware Prussia’s situation at the turn of the 19th century. The Prussian state as it existed in the late 18th century had a long tradition from the Late Middle Ages onwards. In 1701, when Prussia became a kingdom, the House of Hohenzollern ruled the country for generations. Settled in K?nigsberg the state reached to the east parts of Germany and the region around Berlin, covering the district at the Baltic Sea. Throughout the centuries this territory was extended so that Prussia reached the largest pre-Napoleonic extension in 1805. The success of this development let Prussia become one of the most influencing sates in the early 19th century. With a population size in 1806 of 10.7mio Prussia was one of the continental Great Powers. In political and social aspects Prussia was characterized by the long time regency of Frederick the Great (1740-1786). He kept his regency in close relation to France and the regency of the former French king Louis XIV (1643-1715). By only speaking French and ruling Prussia as an absolutistic king he succeeded in extending the territories in wars and accumulated an exchequer of more than 50mio Rtlr. which was nearly double the size of the annual budget of Prussia in 1813. Accordingly, at his death, Prussia was settled on a solid financial basis. Recognizing that the times are about to change, the population hoped for new innovation and reforms. This hope, however, did not come true in the regency of Frederick William II. He, compared to his father, was by far not that successful in leading Prussia. In his regency Prussia failed to industrialize, as old machines from England were bought. These machines turned out not to be more efficient than the classical way of producing and had not only high prices, but also tremendous maintenance costs. His regency, including decadency and misspending, generated huge losses in the exchequer. This is the situation in which Frederick William III. took over the kingdom in 1797 and these circumstances were commented by the Prussian Queen Louise: “Prussia has fallen asleep on the laurels of Frederick the Great.”The spirit of the French Revolution already spread over Europe and Napoleon started his political offensive reaching only two years later the position as the first consul of the French Republic and started to reach for the French expansion all over Europe. Prussia was as a rather agricultural state in the early steps of textile industry less interesting for Napoleon, but was at the same time the only buffer between France and Russia. Aware of this position, Prussia agreed with France on neutrality in upcoming rivalries between France and opponent countries. Napoleon, however, undermined the neutrality several times and thus forced Prussia to make a decision. In August 1806 Prussia joined the alliance of Russia, Austria and Britain against France, not without setting a final deadline to France for respecting the Prussian neutrality in September 1806.After the deadline passed without any reaction, Prussia declared war against France on October 9th 1806. Napoleon reacted with turning his whole military power against Prussia. After being defeated in the Battle of Trafalgar (1805), Napoleon was turned from trying to capture England and focused on Austria and Russia. In consequence, the whole power of Napoleon’s soldiers could now turn against Prussia. With a military that rather consist out of foreign soldiers Prussia’s population did not suffer, but the military force lacked in resistance militancy. Hence the French military overwhelmed the Prussian army. Five days after the declaration of war the Battle of Jena and Auerstedt set a final point. Prussia had to accept tremendous defeats against the superiority of the French Empire. As a result Prussia capitulated only two weeks later on October the 27th whereas Napoleon occupied Berlin. The terms of the capitulation were devastating for Prussia. In the Treaty of Tilsit in July 1807 the conditions of the Prussian capitulation were fixed. Prussia lost more than 50% of the territories from 1805. Moreover, the military strength was limited to 42,000 soldiers. Prussia had to help France with 12,000 soldiers against Russia. The continental system that was introduced by Napoleon to fight economically against Britain is extended to Prussia, so that trade with England was prohibited. Above all Napoleon set up contribution demands of 140mio Frcs. that correspond to about 37mio Rtlr. and thus as Koselleck figures out equals the highest annual income of the Prussian state in the borders before 1806 and one third more than the annual budget of 1813.These conditions in combination with over 50% inhabitants less as a result of loss of territories Prussia was set back to the core of existing. Moreover, without Tsar Alexander I. insisting on the existence of Prussia as a buffer state between France and Russia, Clark points out, the Prussian kingdom would have come to an end. In this situation the Prussian officer Baron vom Stein declares that “the revitalization of the economy might be the best way to get out of national debt.” This means, under French restrictions Prussia started to rebuild the state and economy.3 The Cope Economy3.1 Living Conditions in Prussia The sphere of the cope economy as presented by Goodhand contains the population of the state that is affected by war trying to cope or to survive these circumstances. Cope economical circumstances are characterized by being forced to low-risk activities in the agriculture including an erosion of assets that are usually gathered. Moreover, migration of labor occurs based on the subsistence of agricultural production that is also affected by low trade. A solution for these living and working conditions would be generated in peace. Prussia develops within these years new economic strategies to fight back the French occupation. As formulated in the first chapter, this section aims at analyzing and discussing how Prussia supported and integrated the population to these strategic measures and to which extent this process was self-determined.Suffering under the conditions of the Treatment of Tilsit including trading restrictions to England, one of Prussia’s most important export partners in agriculture, the economic stability, started to disappear. Jacobus and Richter detect the absence of export trade as the major reason for Prussia’s beginning crises. As a result of missing export, prices for food and in particular grain decrease and make farmers selling their products even below base price. Especially peasants that work at the edge of unproductiveness at any time are struggling with this situation running into huge problems. Consequently, they earned less money for their products than actually has been invested in the agricultural production before. Thus inefficiency aggravates the basis of Prussia’s economy. This effect was even sharpened in 1809 and 1810. Jacobus and Richter detect that good harvest in these years put additional pressure on prices. These massive impacts started spreading out to the whole country. In contrast to the ineffectiveness of agriculture, prices for imported goods rose strongly. Investing in machines from England for the industrial sector or even receiving raw materials from abroad got extremely cost extensive. Supported by Otto finding that 75% of the new born children in Berlin died within this period the basic elements of a cope economy can clearly be detected in Prussia. Napoleon’s main objective to not let Prussia get back to old strength hence definitely made an impact. To improve this situation, however, Prussia had to reflect the circumstances and develop strategies to improve the population’s situation. Being aware of the dependency on agriculture for the economic well-being and the fact that this was determined through wealth and success of the rural system, Prussia was reliant on people working in the agricultural sector. In Prussia the living conditions of the rural population were mainly determined by the feudal system. This means, a system of privileged landlords and unprivileged peasants took care of the agricultural production. In consequence it is reasonable to assume that by supporting this sector the well-being and thus the economic power of Prussia would increase again. 3.2 The Revolution From Above Strengthening the agricultural sector means to support different social estates in specific ways. The idea of a revolution from above was generated. Introduced as a scientific term by Stürmer this concept embodies a carefully modification of the existing laws by the state. Prussia tried to stabilize the country through reforms liberating certain parts of the status quo. This step should ensure Prussia not to run into the danger of a revolution. The absolutistic King tried to restructure and liberate the circumstances by keeping control. The reforms took place in different sectors of the Prussian state. With the main objective to establish a solid and wealthy population reforms were introduced by Baron vom Stein and Prince von Hardenberg between 1807 and 1815.The abolishment of serfdom in Prussia was one of the most important steps in these reforms and is done in different restructuring edicts in the years 1807, 1811 and 1816. As a result the peasants were able to get independent from their landlords. In exchange for independence the new farmers had to convey a certain amount of land to the former landlords as compensation for the loss. This means, the independence of the peasants was no gift. It was, as Thiede argues, a very expensive achievement for them. The peasants not just had to buy the land, but also to hand over a certain part of it as compensation. Especially for smaller farms reaching independence was, thus, nearly impossible. Thiede consequently points out that this effect is rather small in the changes. The abolishment of serfdom was especially regulated and extended in the Regulation Edict (1811). As Baron vom Stein highlights in letters the reformed state should be settled on a new agricultural basis, after the rural population improved their situation. Besides this, to be best prepared for the renewal further measures are targeting on other social estates. A further measure aims consequently at the propertied social ranks. This means citizen of the middle class and nobility were in the focus of additional reforms. By levying and rising taxes as well as allowing honorary work for non-noble civilians, Prussia started to integrate the broad population into the recovering process. In combination with the abolishment of serfdom it is obvious that independent rural population assisted this reforming approach. By having independent farmers that work self-governed on their land, Prussia gets the possibility to tax not only the nobility and urban population, but also farmers. This, interestingly, goes along with suggestions in a scientific work of Wagner (1805) stating that every active civic should contribute to national income by paying taxes.To take care of the rural population that cannot afford independence from their landlords and thus had to sell land, Prince von Hardenberg released the edict of economic freedom in the end of October of 1810. Starting in November 1810 former peasants, who did not work on farms anymore due to the expensive independence, got new opportunities of working. The strict working order of the social estates was opened creating the possibility to work also in the industrial sector. At the same time economic freedom and the resulting independence of craftsmen from guilds opened the urban economic system for the people that had to leave the farms. Moreover, economic freedom assured a competitive structure within the Prussian economy. Additionally, the missing monopolistic structure pushed growing companies into a competition among each other. Treue in particular identifies former peasants coming into cities serving cheap labor for growing enterprises. This clearly indicates the leading role and pioneering thoughts of reformers taking care of the aspects of cope economy by Goodhand. The framework directly identifies labor migration as a factor. This can, as demonstrated, also be figured out in Prussia.However, the motivation for these reforms is highly discussed. According to reasons stated in the very edicts, the former research and in particular Koselleck was certain of the reformer’s leading role in these edicts. Convinced by letters by Baron vom Stein in which he points out that economic power can be merely regained in strengthening and reforming the social system to create “functional estates”, the impulse for these reforms seem to come from the inner belief of a new spirited officialdom. Additionally Vogel stresses the importance of individuals and in particular of Prince of Hardenberg. Fighting for the necessity of social reforms and by this the independence and equality of the population especially Stein and Hardenberg are seen as the core of these developments.In combination with their conviction in the doctrine of Adams Smith’s Wealth of Nations Thiede argues the changes in Prussia are pushed by the pro-active group of reformers taking the chance to transform the Malthusian society controlled by a feudal system into a modern Smithian country. This argumentation is strengthened by Treue pointing out the fact that the reformers Hardenberg and Stein made several journeys to England and studied Smith’s theories. Moreover the plan of Baron vom Stein in 1805 to establish a parliament into the state that consists of a House of Lords supports this impression and is according to Thiede a major evidence to the influences. As a result, until the 1970s the research draws a picture that was determined by the great minds of reformers introducing a pro-active revolution from above. There are, however, some aspects that are doubtful in this theory of the great men changing the whole country based just on their own ideas. In the late 1970s and 1980s the criticism on this view rose consistently. Less caught in the glorification of reformers including their pioneering ideas and the involved rising of the national feeling the reformer’s key role get reconsidered. An alternative approach to explain these developments is introduced in the 90s by Kopsidis. The reforms are, hence, not anymore in close relation to the Smithian spirit, but are created due to developments of upcoming market integration that begun in the late 18th century already. Although this progress was affected by Smith, reformers were not actively integrating Smith’s ideas in Prussia. This is highly important for the question how self-determined Prussia integrated the population into their economic plans. In case market integration would have major influence on this integration, Prussia rather reacted to this than acted upon innovative plans.3.3 Negative Policy Integration and Market DynamicsKopsidis identifies that market integration in the 1780s had a major impact on the developments during the Napoleonic times on Prussia. Consequently the impact of the Prussian reforms is estimated to be rather low. In the work on agricultural markets in Westphalia Kopsidis therefore focuses on market integration processes and compares the development of different grain prices within the Prussian territories throughout the years. The results show that market integration as a process started already at the end of the 18th century to a certain extent and was running to1880. On the basis of correlation coefficients for cities in Westphalia and Berlin Kopsidis concludes that high correlation among price levels in the western part can be calculated for the period from 1784 to 1819. In consequence, market integration within the agricultural sector can be detected even in the late 18th century in west-Elbian parts of Prussia. In contrast to the western territories of the former Prussian state, however, the price level of this area compared to Berlin does not show market integration at all until 1819. For east-Elbian territories this would nevertheless be rather surprising. Big parts of the eastern territories did not belong to Prussia until 1803. An economic consistency can obviously not be expected in these times.The market integration Kopsidis detects is, naturally, on a different level than today. The results show that the whole process is rather divided into two market integration phases. According to this, the first phase of market integration contains the beginning expansion of food markets into superregional markets, as it now gets possible to supply food to other countries. Dependency on more international influences in trade comes along with this step of market integration. The price, in contrast, is still mainly determined by regional harvests in the agricultural sector though international interests start to have impact on food markets. This step of market integration could also be supported by the government in the abolishment of internal tariffs in case of missing technological progress to keep transporting costs down. According to Kopsidis, negative policy integration methods could be used to reinforce the overall situation.For Westphalia this situation seems to be quite plausible as a rather small and connected region. Moreover, the missing correlation between Berlin and Westphalia does not surprise, since at least in the years from 1806 to 1813 the Westphalian cities did not belong to Prussia anymore. However, the continental system put a high pressure especially on east-Elbian parts of Prussia so that prices develop completely different from other parts of the European continent. Nevertheless it is necessary to check for indications of early steps of market integration in the Prussian state in 1807.The detection of evidences for such relations also in east-Elbian territories would support the theory of a reacting officialdom dependent on dynamics in the population that already took place. In order to get an impression of how Prussia integrated the population into the economic recovery the detection of such hints is essential. Berlin, in contrast to the Westphalian territories, still belongs to the Prussian state. Although Frederick William III. highlighted the industrialized Prussian kingdom in his speech of 1813 the city was far away from being industrialized in these years. After unsuccessful attempts of establishing steam machines in upcoming manufactories in Berlin at the end of the 18th century not only the city but also Prussia stayed mainly unindustrialized to 1812 when the government tried again to introduce machines for production. Accordingly, merely concentrated on the agricultural sector, the state was highly reliant on harvests to guarantee the population’s health. Though the Industrial Revolution does not have such extensive effects in Prussia in 1806, Jacobus and Wagner show that the continental system had extreme influences on the well-being of Prussian farmers. Having England as the most important trading partner especially for agricultural products, the agricultural sector was dependent on the developments in international trade. A consistent trade determines together with agricultural production the wealth of Prussia. By this, international trade affects food prices and has a major impact on the wealth of the producing peasants. In accordance with internal tariffs that still existed, there are some indications of Prussia already being in the status of a country with market integration. Methods of negative policy integration can therefore be observed not only towards national and international trade, but also in social reforms as deregulation methods towards the population.It seems, additionally, to be rather suspecting that Smithian theories get introduced on purpose of a few public officers that are convinced by the Wealth of Nations. Though Thiede argues that public officers read Adam Smith and travelled to England their motivation for the reforms stays rather unclear. Working in the Prussian officialdom was reserved for the nobility. Enjoying not only privileges of social estates in private life, but also benefiting in their career the reformers would act against themselves. Liedmeyer particularly shows conflicts raised by these reforms in the working life. This means, even if the opening of career paths and strengthening of the rural population is lead by public officers the intention to abolish the social estates seems to be not plausible. Even Stein and Hardenberg, though seen as pioneers by the older research, enjoyed their privileges as noblemen. And, although the economic pressure on Prussia was extremely high, the state was based on the nobility ever since. Disappointing the mighty nobility in radical reforms could raise more pressure than it would help to avoid. This walk on a tightrope not to run into resistance of the nobility, the pillar of the population and economy in Prussia, does unlikely seem to be an act on impulse. In the contrary, it is rather reasonable to assume that in consequence to the close trading relationships to Great Britain the reforms in the 1806 settled on a trend that, as Kopsidis stresses, already started long time ago. Also Treue highlighting that the theories of Adam Smith were taught in the 1790s in Prussian universities in lessons on cameralistics supports this assumption. Implementing Smithian principles to help the rural population thus cannot be the main objective of the reformers. Moreover, it can be assumed that the basic principles are well known and influenced the economy already then. By analyzing letters and works of Stein it can moreover be shown that these letters did not refer to Smithian principles before the defeat in 1806. Interestingly, in his plans of October 1805, suggesting the reorganization of Prussia he searched for sources to finance the imminent war against Napoleon. According to his occupation as financial officer he, in November 1805, suggests the use of price increase to gain money as well as the introduction of paper money. On that account Stein does not look like the pioneering reformer in Prussia that strives to improve the situation of the rural population and carry them in their poverty. Instead, in combination with guidelines for political economics suggested by Wagner in 1805 Stein becomes a public officer that tries to open up sources for the state to gather money. Settling the reforms in the Prussian state on the social dynamics from the late 18th century caused by the well-educated middle class the reformers used early steps of market integration to implement changes. This, naturally, does affect Prussia’s social structure and transforms the social estates into social classes. As a result, however, this supports the theory of progressing market integration. To which extent this is an innovative decision or driven by the necessity of the developments in society has to be concluded separately. In contrast to Kopsidis and Wolf arguing that these steps were not necessary for the social development in Westphalia, the conclusion for the east-Elbian part with its strict social order has to be different. The developments of the market integration have contributed to the social shift towards a more liberalized society. Without the deregulation of the regulatory framework by the Prussian state the possibility for these developments to become nation-wide is hardly imaginable. The reforms of Stein and Hardenberg thus have an important effect on the developments in Prussia and are central to achieve a solid economic basis. Nevertheless, the pro-active role of the reformers is doubtful. As a result of the analysis of Stein’s letters from 1805, the social aspect cannot be observed in the intent of improving the situation of Prussia. The reforms in the rural system are rather driven on pressure of emerging market integration and social change. Vogel concludes the reforms had a clear power-political and economic aim. Due to the market integration theory it must be added to this conclusion that the role of the reformers also for east-Elbian territories has to be seen as reactive. Prussia tried to integrate the population into the recovery plans by dint of several reforms. These reforms were aiming to the different social estates in Prussia and opened the regulatory framework in society, industry and agriculture. By this the Prussian state attended different aspects of the cope economy by Goodhand. The reforms offered rehabilitation assistance for the peasants in the subsistence agriculture and took care of the labor migration. Furthermore the interdependence that was pointed out by Olson between politics, economy and society can be detected. The innovative role and pioneering attitude of Stein and Hardenberg remains thus disputable. The glorification of the epoch-making reforms, however, has to be discarded.4 The shadow economy4.1 The Concept of Illicit TradeThe negative policy integration conducted by the reformers raises the question how these measures not only opened the society and tried to liberalize the economy, but also created the basis for illicit activities. The reforms in Prussia had the main objective to improve domestic circumstances and revitalize the economy. Economic freedom and a loosened social system naturally not only support the evolvement of legal economic strategies. Under the pressure of the continental system that contains massive trading restrictions it is rather reasonable to assume that merchants searched for a way to sell their products nevertheless. According to the theory by Lawrence an increase of trade moreover can be expected. Therefore this chapter aspires to analyze and discuss how the continental system affected Prussia’s economy and to what extent this created new and illicit strategies. The shadow economy, as formulated by Goodhand, focuses directly on such developments and covers hidden economic activities within war-torn countries. In particular the transport sector and businessmen are key actors in this part of the economy benefitting of a weakened state and a rather liberal economic surroundings. These circumstances then enable a basis for cross border smuggling by importing high value commodities. Transferring this model to the circumstances in Prussia these elements that encourage a developing shadow economy can be detected. The main trading partner was England. Accordingly especially maritime trade was essential for the economy. Consequently Hubatsch highlights that the restrictions on export trade hit Prussia very hard. To improve the situation, social reforms and economic freedom were introduced and kept in combination with starting market integration the trade going. Moreover, these measures loosen the economic and social system and by this weaken the role and influence of Prussia simultaneously. The key actors of the framework thus exist in Prussia.Accordingly, the conditions for the development of smuggle may have existed and even increased in these changed circumstances. Relating to the bad situation of Prussia’s infrastructure and remaining internal tariffs smuggling overland would be non-profitable in comparison to maritime trade. This is further coherent as trading routes to the west are largely controlled by the French Empire. Having the Baltic Sea as the easiest and most obvious opportunity of trading, smuggle should have taken place there concentrated on maritime trade between England and Prussia. As these connections were restricted by the continental system this raises the question how effective the released continental system by Napoleon actually was. The continental system was inflicted to Prussia after the capitulation in 1806. According to the absence of trade with England, the consequences of the omitted trading income were devastating. Ergo Otto concludes that the continental system cripples maritime trade and economy tearing down existing trade with the highest industrialized country, England. Adami moreover highlights extensive effects on almost the whole Baltic Sea. It hereby can be seen that Prussia was depended on maritime trade and starts to get huge problems. Massive impacts especially in the agricultural sector have already been shown. However, the continental system does not only have negative impacts on Prussia. Instead Treue and Po?elt show that the impact of the trading restrictions for Prussia can be reasonably divided into two major periods. The first one begins in 1806 and end around 1810. This period is characterized by a boom in Prussian maritime trade. Though Prussia has to join the continental system against England Treue argues thus that the harbors are not controlled at first and thus provide an increase in trade. The closer to 1810 the more this effects vanishes and stagnation controls the Prussian economy and trade. Po?elt supports this view and identifies since 1810 a second period that runs until the abolishment of the continental system in 1814 after Napoleon’s defeat. Although it can be shown that the restrictions already lose some power around 1812 when Russia resigned from this system in this period trade disrupts almost completely.4.2 Maritime Trade in the Baltic SeaTo get an impression how effective the continental system was in restricting maritime trade into the Baltic Sea different data sets have been extracted. These data sets support the discussion on this. The effect of the trading restrictions get even more impressive by comparing the actual ship trade in these years to the periods before and right after the trading restrictions (cf. Figure 1). The Soundtoll Registers list ships that passed the Sound. The database thus supports the analysis by offering details about the number of ships entering the Baltic Sea. These ships had to pay toll to the Danish King for passing with their cargo. Accordingly these registers are a great possibility to control for the influence of the continental system. Thus, Figure 1 presents the number of ships calling several Prussian ports. The regions of Livland and Kurland are presented also, though not belonging to Prussia, to offer a comparison to the closest neighbor regions. By having a look at the trading progress, the impact of the trading restrictions in the Prussian harbors is clearly observable. The evolution of the graphs shows massive decrease in the number of ships passing the Sound between 1806 and 1814. In fact, trade to Prussian harbors in this period definitely had come to an end. Regardless of the ships coming in the years before 1806 to the ports, maritime trade vanishes completely. Figure SEQ Figure \* ARABIC 1: Logged Number of ships arriving to Baltic ports, 1786 - 1820 (Source: Own extractions from the STR online)Interestingly, the graphs show how fast the restrictions spread to the east of Prussia. Kolberg that is located in the western part of Prussia suffers already in 1806 from the absence of maritime trade. The more eastern a city is located, the later this effect occurs. Especially in comparison to the graph for Livland the differences are remarkable. The neighbor province of the Prussian kingdom suffers merely in the years 1808 and 1809 were only one ship reached the harbors of the whole province. A complete absence of ships cannot be observed though. However, in comparison to trade before 1808 the slump is still devastating. In general, the years between 1808 and 1812 are characterized by a colossal decrease in maritime trade in Prussia coming from England. To control the assumption of Treue and Po?elt the numbers of ships are logged to look on percentage changes. Arguing for a boom in trade from 1806 to 1810 the graphs are expected to show a remarkable jump in the number of ships passing the Sound. This, however, cannot be observed. The evolution of the graphs is rather inconspicuous until the establishment of the continental system in 1806. The hypothesis that the trading blockage consists of different trading phases for Prussia cannot be supported. The boom in Prussian ports thus has to come from inner Baltic trade as other regions of the Baltic Sea did not act as substitution destinations. Moreover, due to internal tariffs and a bad infrastructure overland trade there seems to be no alternative. However, it can easily be seen that the continental system must have a major impact on the Prussian economy. As barely ships reached Prussia’s ports, the analyzed distress of the population that was highly reliant on export trade, does not surprise. Moreover, the motivation to change these circumstances by the attempt to introduce smuggling is self-evident. Accordingly, especially Treue and Po?elt write about smuggle occurring in 1810 in Prussia’s maritime trade. Despite the fact that in 1810 Napoleon deployed the Prussian officer Heydebreck to take care of the correct execution of the continental system it seems that smuggle has taken place. In fact, according to Po?elt Heydebreck is said to be the initiator of smuggle between England and Prussia. By charging extra tolls on ships that are allowed to enter Prussian harbors or high demands on cargos from England that are imported as prize of English ships, Heydebreck gained money. Even helping Prussia financially not only in paying contributions, but also funding military expenses to prepare the War of Liberation Treue detects in Heydebreck the financier of the recovery process. As in this case smuggling does not harm, but help the Prussian economy and at the same time undermines French authority it seems reasonable that Prussia supported illicit trade. Between November 1810 and March 1813 Heydebreck’s earnings shall aggregate to 15.3mio Rtlr. According to Treue this covered almost the whole contribution demands of these years and thus generates an important pillar for the revitalization of Prussia’s economy. Treue even states that 25.49% of these earnings are ironically gained by reselling the commodities to France. Additionally, there is some evidence on which cargo was the primary smuggling good. In a letter, Prussian public officers planned receive deliveries of arms from England in 1809 in Kolberg. Though the Soundtoll Registers allow no analyzes of cargos in respective years, data on Kolberg shows that this plan was not realized. With no ship from England arriving, these plans have to be taken as rather hypothetical. However, Heydebreck states in 1813 that illicit trade contained of deliveries from Denmark and Russia. As this definitely can be observed in the Soundtoll Registers this will be controlled. In addition to written documents the Soundtoll Register not only helps to figure out how big the effect of smuggling was, but also give an idea of smuggling routes existing in these years. The fact that smuggling might have existed in Prussian harbors is to some extend astonishing. As already shown in Figure 1 there were almost no ships calling at Prussian ports. According to Heydebreck’s statement, however, Prussian ports are not essential for smuggling. The illicit trade was rather organized in clearance with Russian and Danish harbors. However, the assumption that smuggle is rerouted to foreign ports can be observed by detecting conspicuities compared to Danish and Russian ports.Figure SEQ Figure \* ARABIC 2: Number of ships from England arriving to Danish and Russian ports, 1808 – 1813 (Source: Own extractions from the STR online)By taking a look on Figure 2 it gets clear that there is no remarkable difference to Prussian harbors. The impact of the continental system is disastrous on incoming trade from England as well. The numbers for Denmark do not support the assumption formulated. Only a few ships call the harbors of Prussia in this period. Russia, in contrast, shows a small peak in number of ships calling the ports. Especially in 1813 many ships arrived. As Treue detected that the occurrence of smuggle is limited in between November 1810 and March 1813, naturally, not all of the ships arriving can be taken into account. Due to seasonal climatic changes it might be possible that the Baltic Sea was not navigable for ships. In this case, only the years 1811 and 1812 would be merely important for maritime trade (Table 1). By controlling for trade in 1810 and 1813 it can beTable SEQ Table \* ARABIC 1: Numbers of Ships arriving from England toRussian and Danish ports, 1810 and 1813 by monthJan.Feb.Mar.Apr.MayJuneJulyAug.Sept.Oct.Nov.Dec.1813Russia00010834500000Denmark0000052000001810Russia000201001000Denmark000000000010Source: Own extraction from the STR onlineshown that trade into the Baltic Sea to harbors of Russia and Denmark was rather marginal. Accordingly, smuggle consists at most out of the ships in 1811 and 1812 plus one ship to Denmark in November 1810. This means 15 ships calling Russian and Danish harbors should produce about 11.4mio Rtlr. of toll for smuggling commodities to Prussia. This amount seems to be extremely high to be just generated by these ships’ smuggling goods. Also by considering ships that directly call Prussian ports from England this would add four ships. It is hardly imaginable that these few ships could produce about 11.4mio Rtlr. This means, smuggle in maritime trade cannot be observed with regard to the information given by Heydebreck. Even if every ship would carry smuggled cargos it seems unrealistic to earn so much money. 4.3 Sweden as IntermediaryHowever, interesting evidences on trading routes are presented by the itinerary of General Gneisenau. On his journey to England he does neither take the direct way to England by ship nor travels through Denmark. He rather travels according to the routes of Heydebreck at first to Russia, but also stops in Stockholm. Due to this, Sweden might play an essential role as a connection to England. Sweden that is not bound in the continental system offers possibilities to ship cargos between Great Britain and the Baltic Sea. As inner Baltic trade cannot be observed by the Soundtoll Registers, outgoing cargos from Sweden to Russia stay hidden. However, by having a look at maritime trade to Sweden and Finland the evolutionFigure SEQ Figure \* ARABIC 3: The progress of maritime trade from England to Sweden/ Finland, 1750 – 1850 (Source: Own extractions from the STR online)of the graph is comparable to other areas in the Baltic Sea. Interestingly, in 1810 the numbers of ship jumps from only 2 ships arriving in 1809 to 52 in 1810. Though none of the ships in 1810 calling Swedish and Finish ports can contribute to the discussed months, the arrivals in 1811 and 1812 show that Swedish ports still have relatively high trade with England. 43 ships arrived in 1811 and 1812 Swedish ports after departing in England. Furthermore it is striking that at the beginning and the end of the continental system the number of ships calling these ports peak. In 1806 216 ships reached Swedish and Finish ports and in 1815 even 242 ships. This high level is firstly reached in the 1840s again. Although the values in 1806 might be explained by ships affected of the continental system and thus switch to Scandinavian ports, there are conspicuities occurring. Especially the temporary peaks during the time of intact trading restrictions in 1810 with 52 ships arriving and 36 ships in 1812 could be an indication for smuggling. These results support furthermore the hypothesis of Kock arguing that maritime trade in these years was mainly between Swedish and English ports. In particular Gothenburg, Malm? and Ystad were the main harbors in this maritime trade. Though the Registers do not support this hypothesis (cf. Figure 4) this is primarily caused by limitations of the database. Ships going to G?teborg or Malm? do not pass the Sound and thus are not registered in the data. Moreover Kock states that foreign ships sailed under Swedish color to be able to trade with England. Figure SEQ Figure \* ARABIC 4: Number of ships arriving from England to Swedish Ports, 1806 to 1814 (Source: Own extraction from STR online)The data for Ships under Swedish color between 1750 and 1850 show some conspicuousness (cf. Figure 5). Comparable to the data for maritime trade in Stockholm there are temporary peaks framing the important years. With peaks in 1806 and 1814/1815 an effect can definitely be observed. For the years of the continental system, however, the peaks are rather small. Nevertheless, in 1810 51 ships sailed under Swedish colors. These ships again cannot be taken into account based on the months they sailed in. However, in 1812 even 33 ships sailed under Swedish colors. This supports Kock’s results as it is a relatively high number for the years of the continental system. A further strategy in sailing under foreign, particularly Swedish, color can reasonably be assumed on the basis the data. Consequently, it is easy to imagine that maritime trade between Prussia and England was organized on a route containing Sweden for smuggling commodities to Prussia. Sweden and, according to Figure 4, Stockholm seem to be central for illicit trade. With 6 ships in 1811 75% of all ships calling Sweden’s and Finland’s ports go to Stockholm. In 1812 still 38.9% of all ships to Sweden and Finland came to Stockholm. This means one trading route is detected between Stockholm and England. For the ports in the East of Sweden the limitations of Registers prevent a final result. However, the connection via Russia to Sweden existed forFigure SEQ Figure \* ARABIC 5: Number of ships under Swedish colors sailing from England to Sweden, 1750 to 1850 (Own extractions from STR online)journeys. As a result the data stresses that this connection was highly used during the continental system. The occurrence of illicit trade is most likely. Furthermore, by combining the 43 ships of Sweden and Finland with the 19 of the other Baltic countries as sources for illicit trade the amount of 11.4mio Rtlr. seems to be much more realistic. Due to this the picture of the illicit trade should be expanded to the whole Baltic Sea to get an impression of the extent of smuggle within these years. Considering these results it is reasonable to assume smuggling in maritime trade undermining the continental system. To argue that not every ship is registered in the Registers seems to be no satisfying explanation. Though illicit trade might not be registered as illicit, every ship entering the Baltic Sea had to take the Sound, as other routes would lead through Denmark and by this through Napoleon’s confederate countries. Sailing under foreign colors rather explains another strategy. Consequently, can very easily be seen how powerful the continental system was. The statement of Heydebreck having organized smuggling seems to be plausible. Prussia ergo even supported smuggling to establish an additional source of money under pressure of trading restrictions. Treue moreover states that France helped by paying for smuggling goods to carry Prussia’s recovery process. It is obvious that these trading connections could also be used to get weapons and subsidies from England.In relation to the research questions it can be concluded that the continental system had devastating consequences for Prussia’s economy. Prussian ports struggled with a major decrease in ships arriving. The boom detected in the first years by Treue and Po?elt, however, cannot be confirmed in maritime trade. An increase could not be observed in the Registers. Accordingly, the only possibility would be to assume a tremendous increase in trade within the Baltic Sea. Ships entering or leaving the Baltic Sea, however, cannot explain this boom. As a result a temporary trading boom based on maritime trade passing the Sound must be discarded.The conclusion relating to smuggle is another. In Heydebreck’s declaration it is stated how and when smuggling was organized in maritime trade. Though neither data on incoming ships to Prussia nor Russia or Denmark support the hypothesis, another possibility to import English commodities can be detected. The connection of Gneisenau’s journey to England existed also for trading. The occurrence of smuggle supported by Prussia is therefore most likely. The strategy to increase trade mentioned by Lawrence can ergo be detected in form of smuggling. The statement of Heydebreck that smuggle was organized via Denmark and Russia, in contrast, is doubtful. Possibly this indicates increased inner Baltic trade relating to Kock’s assumption. Shipped commodities from within Sweden or to Russia and Denmark remain hidden in the data. 5 The war economy5.1 Financial StrategiesTaking the look at war economy the main focus will now be on production and the financial sector of the economy, analyzing and discussing the question of what strategies were used to strengthen the state’s finance and if these strategies caused a crowding out effect. Prussia was besides the previously discussed factors also reliant on money that helped to finance expenses necessary to wage war against France and pay back contributions. War economy consists, according to Goodhand, of different aspects. Suggested by Goodhand and Lawrence there are several measures to improve the financial situation. At first there exists an option for taxing the population and trade. These taxes could be raised directly or indirectly and thus offer the possibility to gain money in different ways. Moreover printing money is a measure highlighted by Goodhand usually observed in war economy. Using their right to print money, states try to inflate the currency and pay back debts easier. Forced loans and subsidies are also contained within these strategies of financial reproduction. Important to consider is that policies for reproduction in the financial sector must be implemented on a regional and on a global scale. This lowers pressure on the domestic economy and by this reduces the risk to run into huge problems.Observing that even illicit activities get supported by Prussia it is easy to understand how urgent the need for money was. Botzenhart consequently points out that the first priority of Prussia was to get money. As the Prussian economy faced the worst economic circumstances so far, every opportunity to gain money had to be implemented. It should be thus possible to detect several concepts. Settled on a reformed population and economy, Prussia got more opportunities to deal with this situation. Besides the aims to help the rural population, another rather financial motivation can be detected in the reforms. Peasant that were willing to get independent had to pay compensation money to their landlords. According to Treue showing that there was no private bank system the nobility was in charge to offer financial support. Stein pointed in his letters (1805) even out that these domestic loans were completely used. Thus compensation money created new sources to get loans. Already before the first war against Napoleon (1806) the preparation has eaten up all loan possibilities. The nobility had to receive money to be able to grant credits for Prussia again. Stein moreover stressed that credits in foreign countries are rather to be avoided. This was tried to achieve by the compensation money payments. Even the emancipation of the Jews in Prussia is closely related to this. As Treue shows Jews are usually very wealthy. By emancipating them Otto shows an additional source for loans since 1812. These measures show clearly how Prussia tried to gain as much money as possible from the population. The fact that Prussia still had to borrow money abroad demonstrates how essential the shortage of money was. According to Treue more than 50% was received as foreign credits especially from England. In consequence Hubatsch concluded that Prussia was highly reliant on England financially. Stein and Hardenberg thus were not successful in avoiding credits abroad.The reforms created more equality in the social system. Privileges have been cut and the rights of the rural and urban population strengthened. By this also tax duties were equalized and Prussia got hence the power to tax the whole country. Though Wagner in 1805 advised not to raise taxes if not indispensable, Hardenberg introduced several taxes. Taxes for war, luxury goods and income as well as capitation had to be paid regardless of social status. However, these taxes did not have the desired earnings, as due to Treue only 22% of the spending in war was based on domestic money. As clearly observable financial straits have outdone the aim of a wealthy agricultural basis. Though economic freedom opened markets and abolished the feudal system, these reforms contained annual licenses that had to be bought annually to legalize businesses. Accordingly, financial interests dominated the reforms.Furthermore, the introduction of paper money, an additional aspect of war economy related to Goodhand, can be observed. Already planned by Stein in 1805, Hardenberg established paper money in 1810. Interestingly, the letter of Stein in November 1805 seems to be closely related to the work of Adam Smith that characterizes paper money as a possibility to raise national income and push the industrial sector. Stein referred generally to the situation in England. In consequence this must be seen in contrast to Kopsidis’ findings. The influence of market integration processes on this step is rather circumstantial. Especially England’s pioneering economy caused that Prussian public officers tried to adopt British methods. This means, at least in this perspective the financial reforms tend to be influenced by Smith. Wagner’s work in 1805 supported moreover the decision to introduce paper money as a helpful way to pay back liabilities. Thus paper money in domestic trade and salaries enabled Prussia to get back full-bodied coins to pay particularly liabilities abroad.However, it is obvious that introducing paper money is not without risk. Though Wagner’s work explicitly suggests the introduction of paper money, the risks of inflation are stated. That Prussia actually runs into inflation problems is shown by Treue. Being caught in huge economic problems and since 1810 in a major economic downturn it could be argued that inflation can be seen as an indication of economic depression. As Lawrence points out, an increase in money costs reduces the consumption of the whole population and by this harms especially the poorest part of it. This was definitely not desired by Prussia. However, the measures implemented by Prussia for financial stability cover the whole width of Goodhand’s war economy spectrum. Prussia first tried to keep existing structure running in basing the finance on domestic loan system. To rehabilitate this system, social structure and regulatory frameworks were opened in exchange for independence fees. The additional measures as the introduction of paper money to increase the amount of full-bodied money and the loans abroad with huge percentages in the final finance plan indicate Prussias tremendous problems.5.2 The Crowding Out EffectAccording to Schumpeter a possible economic depression requires an intervention of the state into the economic sector. In other words: within these measures to gain money and prepare war might be possible active regulations of Prussia detected to stabilize the economy. Previous research especially on England discusses the occurrence a crowding out effect during the Napoleonic Wars affecting the Industrialization. By Clark concluding that a partial crowding out effect has taken place it gets interesting to which extent this effect also occurred in Prussia. The strategies conducted display clearly how Prussia tried to gather money. Due to the reforms public officers definitely started to act in terms of financial policies. In rather recessive economic environment main policy measures should be in fiscal expansion policy. Taxes and independent fees were levied in 1808 and 1810. Consequently after 1810 the attempt of Prussia to positively influence the economy and increase population’s wealth by investing in the country should be detected. Elements of fiscal expansion that are, according to Tervala, based on tax revenues flowing into the market can, however, not be observed. In contrast, Prussia even levied new taxes and thus stressed the financial situation of the population. As Treue points out, particularly rich manufacturers, actually able to invest into the economy, were harmed by forced loans with imposed conditions taking their money.Prussia established new liberalized conditions, but at the same time got extremely active in financial markets. Not being able to accumulate more money by taxes, as D?nhoff highlights, Prussia had to act according to Bond Market Approach. Spector declares the BMA as only possibility for countries that cannot raise their money without entering the bond market. In relation to this Treue shows that new taxes generate no revenues anymore in 1810. A BMA can definitely be assumed for Prussia in this situation. However, this approach raises danger to crowd out investments. Treue argues that more than 50% of the money needed for recovery was based on loans or subsidies from England. This means these loans are not provided by domestic markets and therefore do not affect Prussian interest rates. As a consequence to this, a crowding out effect in Prussia would be rather unlikely. With the major share of loans not being domestic it must be questioned to what extend the interest rate was affected. In contrast, the reforms rehabilitated domestic capital market. As Koselleck figures out, due to a lack of domestic bank systems, Prussia’s nobility was the primary source for loans. Farmers paid fees to landlords thus restored domestic capital stocks. By this, Prussia got the possibility to use this source for domestic loans again. In combination with forced loans to fixed conditions inflicted on rich entrepreneurs crowded out investments got likely. Money taken from the broad population to pay contribution can obviously not be invested into Prussia. Especially farmers that achieved creditworthiness through reforms to build up their agricultural production had consequently no opportunity to receive any loans. A rising interest rate as an indicator for a crowding out, however, is rather plausible to occur. Even if forced loans for Prussia will not allow a higher interest rate for loans, private investors interested in borrowing would have different conditions. The lack of money on the capital market, though a central capital market did not exist, naturally affected the interest rate. As a result, private investors would be displaced by Prussia or discouraged by bad credit conditions. Not being able to invest anymore in own companies does crowd out potential investments in the industry. Crowding out in private and industry investments can ergo be observed in Prussia’s economy.Heim and Mirowski concluded for England that a crowding out effect just has taken place in some areas of the economy. This argument is supported by Clark stating that the capital market in England was segmented and thus governmental debts would not spread to other segments of the capital market. As Kopsidis shows market integration does not influence the Prussian economy on a large-scale. This could also be applicable to Prussia. The width of Prussia’s methods, however, supports a different conclusion. In taking money from farmers, entrepreneurs and noblemen potential for investments of the whole population got cut off. For that reason different areas of the capital market got affected by Prussia’s financial policy so that the conclusions of Heim and Mirowski as well as of Clark cannot be extended to Prussia. A crowding out effect in Prussia influencing the whole population and the entire capital market has taken place. Prussia tried to stabilize the financial basis of the state. After taking the liquid money from the population in form of taxes other measures were introduced. The capital market was based on noblemen offering grants to the state. Prussia restored the money in reserve of this capital market by several reforms that opened financial resources of the rural and urban population. Even paper money was introduced into the internal economy to pay debts abroad with replace gold coins. In taking fresh money off the capital market, Prussia acted as an investor and therefore raised the interest rate of loans for other investors. As a result a crowding out effect was caused putting pressure on Prussia’s population again.6 The Emotional Economy6.1 Reform and Restriction based SpiritThe last aspect in the Goodhand framework is the emotional economy. Stating the importance of spirit in wars besides rational reasons the concept of emotional economy is introduced. Especially relating to the war in Afghanistan the role of convictions is stressed. However, as emotions are argued to be very important in wars the War of Liberation could be more successful if it was based on an enthusiastic population fighting back Napoleon. The emotional sphere is thus important to integrate to get an adequate impression of the circumstances. This chapter therefore aims to analyze how Prussia tried to establish a common feeling in the population towards the state.In the early 19th century a general national identification with Prussia in the population did not exist. Although Stein declares in 1807 that his mother country is Germany, this statement is rather unusual. As Germany did not even exist in these years the statement could rather be taken as identification based on other aspects than geographically borders or sympathy for Prussia. However, his colleague Altenstein in 1808 stated in a letter the “voice of the nation” would not exist in Prussia. Especially considering that big parts of Prussia were incorporated in 1803 it gets clear that an overall national spirit could not exist. Additionally, Napoleon was not necessarily seen as a threat. Though curtailing the concept of the French Revolution, he stood for new and liberal ideas that embody thoughts of the broad population. Even contemporary celebrities as the philosopher Hegel and poet Goethe supported Napoleon. Goethe moreover wrote to his publisher Cotta after meeting Napoleon that he has “to admit not being possible to face anything superior or more pleasant than meeting the French Emperor.” Herre states that Goethe’s admiration for Napoleon even increased after receiving a French badge of honor by him. Frederick William III. thus could not just build up resistance against France on a united country. A major aim hence was to encourage the population rising against Napoleon. There are different theories on how this was achieved. Otto in particular sees an important factor in the rural population. The bad living conditions in the agriculture united the broad population against France and the trading restriction. The resistance consequently is rather seen as something grown under pressure. Absence of maritime trade and according less agricultural products shipped to England affected especially the rural population. For Koselleck the key is the broad interest of the population in the Prussian state. Caring about their home country this would create a spirit of belonging and a common basis for resistance. This explanation rather focuses on the established reforms again. Thiede and Fenske agree to this approach adding the fact that Prussia announced the introduction of a constitution several times. In letters of Stein to the Prussian King in 1807 and 1808 the possibility of a constitution was actually discussed. It is reasonable to assume that against the background of the reforms the support of the population towards Prussia increased. Interestingly, Otto’s approach focused on trade and finance, whereas Koselleck, Thiede and Fenske concentrate on reforms. Hence, all elements of Goodhand’s framework are contained without recognizing emotions as a possible impact on Prussia’s common feeling. 6.2 The emotional ApproachAn alternative approach, in contrast, is to take emotions into account. Honor, pride and sympathy could be also seen as a reason for the development of national spirit. Following this approach, clearly a first step in the public perception generated the Prussian royal couple. Due to the circumstances after the defeat, Queen Louise sold her jewelry and diamonds in 1808. Obviously it is controversial whether this step was voluntarily done, but a signal function to the Prussian population can reasonably be assumed. The young Queen was extremely popular and consequently had major influence on public cognition. This sympathy culminated after Louise’s unexpected death in 1810 in glorification and supported an upcoming national spirit. Thus, Queen Louise is certainly a pillar for nationwide spirit. A further method of Prussia to strengthen the common feeling and unite the country can be detected in March 1813. Just a few days after Frederick William III. calling Prussia to take up arms, another call was released by the Princesses of the Prussian territories: ‘I gave Gold for Iron.’ In contrast to compulsory military service for men, women could not be united in an army. National spirit in the whole population had to be gained in separated steps. Aiming at every woman in Prussia that had to send husband, son, brother or father to war, the Princesses requested these women to contribute to the War of Liberation. Gold rings, chains and anything else of value should be sent in. Melted down these jewelries were then used to help Prussia to buy food or uniforms for the soldiers fighting. In exchange Prussia offered iron rings with “Gold gab ich für Eisen 1813” engraved. Playing a rather small role in research yet this call contains one of the most impressive indications for developing national spirit. Though Clark and Marshall discuss the importance of this concept briefly, the focus of Clark lies particularly on economic effects. The economic impact was determined by Clark by having an effect of 6.5mio Rtlr. For gold handed over voluntarily this amount is astonishing. By requesting also to hand in fabric or sew uniforms it could be argued that moreover a second production sector was established. The women gave their work motivated by national spirit to support Prussia. This, naturally, also has to be taken into account to women’s financial contribution. In consequence Clark underestimates the effect. The 6.5mio Rtlr. only contained the metall value not sewed uniforms or submitted fabrics.However, besides economic effects the call had a much deeper impact. It rather contributed to growing national identification of Prussian women. Marshall even detected peer pressure among these women. Women avoided falling into disgrace by not participating in this call especially when the men return home from war. In fact, Marshall stated that the iron ring was kept as the biggest treasury as a sign of supporting the nation. This supports the impressions of the tremendous effect on Prussian women. Müsebeck edited also some letters of women sending in jewelry. Beside spiritual succor for the soldiers, submitted gold was dedicated to the “eternalized Queen [Louise].” Identification and sympathy for the country and the glorification of the Queen can already be seen here. It is hard to figure out a particular strategy of Prussia to establish a common feeling. National spirit is something that grew from within. Thus theories how this happened are highly different. Otto’s approach that settled on trade and dissatisfaction in the population that suffered from bad living conditions. This approach based on side-effects of Koselleck’s approach and focuses rather on announcement of a general constitution for Prussia. Hope on the one hand and dissatisfaction on the other should contribute to the common feeling. Rather neglected in the research, however, identification, honor and pride seem to influence this development as well. The development of national spirit, thus, seems to be influenced by several aspects. The reforms and the announcement of a general constitution clearly had a massive influence on the population. But it can be questioned to which extent Prussia would have succeeded in uniting the whole population without the emotional sphere and the glorification of Queen Louise. Though men can be united in military fighting for the same convictions, women and children have to be reached differently. With the Prussian Princesses calling to the whole population not only an economic factor was gained, but the whole population got involved into the success of the War of Liberation and by this the development of nationality was supported. Prussia thus had succeeded to evolve a national spirit with by combining rational with emotional measures. A combination of the different theories therefore seems to be the best approach.7 ConclusionThe analysis of the War of Liberation in Prussia offers interesting results. By using the framework by Goodhand the circumstances in Prussia get analyzed according to the modern theories of waging war in a new way. The spheres of cope, shadow, war and emotional economy directly aim on important elements of the Prussian economy and thus detect new perspectives and challenges for the scientific research.As the results show the established scientific research has to be reconsidered in various aspects. The cope economy analysis shows particularly the need to expand the historical research with economic theories and vice versa. The classical view of pioneering reforms gets reversed by financial and power-political motivation observable in letters. Moreover, Kopsidis’ approach of market integration processes can clearly supported. This interdisciplinary approach covers historical insights with results on market theory and thus embodies necessary expansion to both theories. In terms of trade it must be concluded that existing approaches have to be discarded to a certain extent. The theory of a booming economy between 1806 and 1810 by Treue and Po?elt has to be discarded. The data clearly stresses the high efficiency of the continental system and therefore causing major doubts on this theory. The occurrence of smuggle as described in contemporary letters, however, could be shown and Kock’s results on ships sailing under foreign countries supported whereas in contrast the theory on Malm? and G?teborg as being important smuggler ports could, due to the limitations of the Registers, not be observed. Especially for research on maritime trade the Soundtoll Registers offer huge potential for further research concentrating on how illicit trade undermined the French authority and which strategies were developed.The occurrence of a crowding out effect could also clearly be shown. In contrast to the controversial results of Clark, Mokyr and Heim and Mirowski for the situation in England, in Prussia the results seem to be rather clear. In taking the whole population’s money for loans, possible private investments were suppressed and prohibited on a large scale. Concluding for a partial crowding out effect according to England, hence, seems not to be satisfying. Rather an overall crowding out effect can be detected.Especially in the emotional sphere of the War of Liberation the Goodhand framework offered a new perspective. In showing that emotions played an important role in the development of the national spirit the rather rational explanations focusing on reforms and constitutions have to be extended. The call of the Prussian Princesses highlighted which influence the whole nation on the success of the war had. In requesting support of the population not only an economic factor was generated, but also national spirit was created. In combination with the glorification of Queen Louise it gets clear that the established models covered merely economic aspects and therefore lacked in capturing the whole process. An integration of these factors would strengthen the explanatory power of these approaches. In general, the measures suggested by the theory on war economy can be clearly identified in the Prussian economy. Prussia tried to establish an economic basis that supported the state’s needs in the best possible way. Based on a strong economy the aim to fight back Napoleon was generated. The results show particularly the complexity of this process. The interdependence of different spheres that was highlighted by Olson determines also the picture of the Prussian wartime methods. The Goodhand framework supported the separation of methods into different effects and highlighted areas influenced by these measures. By this it offers new perspectives on the Prussian wartime economy and presents new challenges for upcoming research. The biggest challenge for upcoming research on Prussia in this time is best formulated by Mokyr’s conclusion on England: The “highest return strategy is to get more data detected to get a better impression of these years.” The glorious time of Frederick the Great was gone and Prussia got woken by Napoleon. By accepting this situation, changes were produced by huge efforts in reforms and restructuring. Supported by incipient market integration, Prussia managed within only five years to recover from this disaster and fought back Napoleon. From the glorious defeat of a kingdom with different individual territories in 1806, Prussia grew to a united nation. These years are essential for the later take off of Prussia and the rise to a European Great Power. Though officials try to cut down reforms and reestablish the old system again after 1815, the democratic movements from 1832 onwards are based on these years. ReferencesSources and DataAdami, F. (1924): Schicksalswende Preu?en 1812/13 – Nach Aufzeichnungen von Augenzeugen. B. Krieger (ed.), Blasewitz. [= Schicksalswende Preu?en]Botzenhart, E. (1959): Freiherr vom Stein – Briefe und amtliche Schriften. W. Hubatsch (ed.), 2. Band, 1. 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AppendicesAppendix 1: Map of Prussia in 1805 and losses 1807 (cf. rbb, Preu?en, Chronik eines deutschen Staates)-28130538735-19672301928495 -48533053768090Appendix 3: The Prussian Reform Edict of October 9th, 1807Edict Facilitating the Possession and Free Use of Landed Property, as well as the Personal Conditions of the LandsmenWe, Frederick William, by the Grace of God King of Prussia, etc., etc.Hereby make known and give to understand: Since peace has been established we have been occupied before everything else with the care for the depressed condition of our faithful subjects and the speediest revival and greatest possible improvement in this respect. We have considered that in face of the prevailing want the means at our disposal would be insufficient to aid each individual, and even if they were we could not hope to accomplish our object, and that, moreover, in accordance with the imperative demands of justice and the principles of a judicious economic policy it behooves us to remove every obstacle which has hitherto prevented the individual from attaining such a state of prosperity as he was capable of reaching. We have farther considered that the existing restrictions both on the possession and enjoyment of landed property and on the personal condition of the agricultural laborer especially interfere with our benevolent purpose and disable a great force which might be applied to the restoration of cultivation, the former by their prejudicial influence upon the value of landed property and the credit of the proprietor, the latter by diminishing the value of labor. We desire therefore to reduce both kinds of restrictions so far as the common well-being demands and accordingly ordain the following: 1. Every inhabitant of our States is competent, without any limitation on the part of the State, to own or mortgage landed property of every kind. The noble may therefore own not only noble but also non-noble, citizen and peasant lands of every kind and the citizen and peasant may possess not only citizen, peasant and other non-noble, but also noble tracts of land, without in any case needing special permission for any acquisition whatever, although henceforth, as before, every change of ownership must be announced to the authorities. All privileges which are possessed by noble over citizen inheritances are entirely abolished, as well as the restrictions and suspension of certain property rights based upon the personal status of the holder. Special laws shall still continue to regulate the right of those to acquire land who are by reason of their religious beliefs precluded from performing all the duties of citizenship. 2. Every noble is henceforth permitted, without any derogation from his station, to engage in citizen occupation and every citizen or peasant is allowed to pass from the peasant into the citizen class or from the citizen into the peasant class. 3. A legal right of pre-emption and of prior claim shall exist hereafter only in the case of superior proprietors, of the lessors of estates on perpetual leases or to copy holders, and of co-proprietary owners, and where a tract of land is sold which is confused with or surrounded by other holdings. 4. The possessors of alienable landed property of all kinds, whether in town or country, are allowed, after due notice given to the provincial authority, reserving the rights of those holding mortgages and those enjoying rights of pre-emption (3.), to separate the principal estate from its appurtenances, and in general to alienate lands piecemeal. In the same way co-proprietors may divide among them property owned in common. [ . . . ]6. If a landed proprietor finds himself unable to restore and maintain the several peasant holdings existing upon an estate which are not held hereditarily either on a perpetual lease or of copyhold, he is required to inform the authorities of the province, with the sanction of which the consolidation of several holdings into a single peasant estate or with outlying land shall be permissible so soon as serfdom shall have ceased to exist on the estate. The provincial authorities will be provided with special instructions to meet these cases. 7. If, on the contrary, the peasants' holdings are hereditary whether in virtue of a perpetual lease or of copy hold, the consolidation or other change in the condition of the land in question is not admissible until the rights of the previous owner are extinguished, whether by the sale of the land to the lord or in some other legal way. In this case the provisions of (6) shall apply as well to this species of holdings. 8. Every possessor of feudal or entailed property is empowered to raise the sums required to replace the losses caused by the war by mortgaging the estates themselves and not simply the revenue from them, provided that the application of the funds is attested by the Landrath of the Circle or by the Direction of the District Department. From the close of the third year after the contracting of the debt the possessor and his successor are bound to pay off at least a fifteenth part of the capital annually. 9. Any feudal connection not subject to a chief proprietor, any family settlement or entail, may be altered at pleasure or entirely abolished by a resolution of the family, as has already been enacted in regard to the Fiefs of East Prussia (except those of Ermeland) in the East Prussian Provincial law, appendix 26. 10. From the date of this ordinance no new relation of serfdom whether by birth or marriage, or by assuming theposition of a serf, or by contract can be created. 11. With the publication of the present ordinance the existing relations of serfdom of those serfs, with their wives and children, who possess their peasant holdings by inheritance, or in their own right, or by perpetual leases or of copy hold shall cease entirely together with all mutual rights and duties. 12. From Martinmas, one thousand eight hundred and ten (1810) all serfdom shall cease throughout our whole realm. From Martinmas 1810 there shall be only free persons, as is already the case upon the royal domains in all our provinces, free persons, however, still subject, as a matter of course, to all obligations which bind them as free persons by reason of the possession of an estate or by virtue of a special contract. To this declaration of our supreme will everyone whom it may concern and in particular our provincial authorities and other officials are exactly and dutifully to conform and the present ordinance is to be universally made known. Source of English translation: James Harvey Robinson, ed., Translations and Reprints from the Original Sources of European History, vol.II, no. 2: The Napoleonic Period. Philadelphia: University of Pennsylvania, 1902 , pp. 27-30.Source of original German text: Sammlung der für die K?niglichen preu?ischen Staaten erschienenen Gesetze und Verordnungen von 1806 bis zum 27. Dezember 1810. Anhang zu der seit dem Jahre 1810 edirten Gesetz-Sammlung für die K?niglich preu?ischen Staaten[Collection of the Laws and Decrees issued for the Royal Prussian State from 1806 to December 27, 1810. Appendix to the Law Collection for the Royal Prussian State edited since the Year 1810]. Berlin, 1822. Reprint: Bad Feilnbach, 1985, pp. 170-73.Reprinted in Walter Demel and Uwe Puschner, eds., Von der Franz?sischen Revolution bis zum Wiener Kongre? 1789-1815[From the French Revolution to the Congressof Vienna, 1789-1815]. Deutsche Geschichte in Quellen und Darstellung, edited by Rainer A. Müller, Volume 6. Stuttgart: P. Reclam, 1995, pp. 327-32.Appendix 4: The Prussian Finance Edict signed by Chancellor Hardenberg and King Frederick William III. (October 27th, 1810)Edict on State Finances and the New Establishment of Taxes We Friedrich Wilhelm, by the Grace of God King of Prussia, etc. etc.Until now, we have been tirelessly preoccupied with ascertaining the best means for restoring the prosperity of our state, which declined through the last war, for elevating the credit, and for fulfilling the obligations the state has toward its creditors; in particular, through very great exertions we have reduced, as much as was possible, the war in demnity of 120 million Franks payable to His Majesty, the Emperor of France, such that half will have been paid off by the end of the current year. With emotion, we have noted evidence of the attachment of all classes of our loyal subjects to our person, our house, and our government; in particular, we have also recognized the help that was rendered to us in securing the abovementioned contribution and in raising the funds otherwise necessary by our faithful estates and by the trade estate with their utmost willingness. The difficulties we still have to overcome are considerable, and they still demand no small sacrifices, to our sorrow. [ . . . ]We see ourselves compelled to demand from our loyal subjects the payment of higher taxes, chiefly on consumption and luxury items, although they shall be simplified, restricted to a few articles, combined with the abolition of arrears and gate excises, as well as several onerous dues, and borne by all classes of the nation relatively equally, and they shall be reduced as soon as the need they are intended to meet comes to an end. In areas that have suffered especially from the war, especially in the Kingdom of Prussia, we shall take care to ease, with extraordinary remedies, the burden that will arise from these new consumption taxes.Incidentally, it goes without saying that the high dues on colonial goods that have now become necessary through the Continental System include provisions for lowering them to the intended rates. As it is, the oppressiveness of these new impositions shall be moderated as much as possible in that we intend, by means of a comprehensive reform of the tax system, to have all of them borne by everyone based on the same principles for our entire monarchy. In the shortest order, a new land register will therefore also be drawn up in order to determine the land tax based on it. Our intent is by no means to increase the land tax that has been levied until now, only to ensure the equal and proportionate distribution among all those liable to the land tax. However, all exemptions that are no longer compatible with either natural justice or the spirit of administration in neighboring states shall be abolished. That is, properties that have hitherto remained exempt from the land tax shall be taxed without exception, and we wish that it also be done specifically on our own demesne possessions. We hope that those to whom this measure will be applied can find comfort in the fact that in the future they can no longer be accused of evading the public burden at the expense of their fellow subjects, and in these considerations: that the land tax to be paid by them in the future is not equal to the expense they would incur if one demanded from them the knightly service obligations that were originally attached to their estates, in return for which the existing, quite disproportional dues are dropped; also, that free use of the landed property, complete commercial freedom, and exemption from other burdens that would otherwise have been necessary shall be granted; finally, that the land tax is already being borne by the owners of estates in a large part of our monarchy. For we wish to implement complete commercial freedom in return for the payment of a moderate patent tax and the cessation of the existing trade taxes, simplify the customs system, abolish soccage, and where a loss is genuinely proved in accordance with the principles to be prescribed, the state will pay compensation in exchange; [we wish] to grant and secure property to that segment of our subjects who have not hitherto enjoyed its possession, also to completely abolish a number of oppressive institutions and imposts. [ . . . ]We have the intent, as the territorial ruler, to designate our demesnes for the repayment of state debts. To that end, we have decided on their gradual sale. [ . . . ].In addition, we have decided to secularize the spiritual estates in our monarchy and to have them sold, and at the same time to have the proceeds thereof devoted to paying off state debts by ensuring the complete pensioning of the current prebendaries and the generous endowment of parishes, schools, and foundations. Here we have in mind not only the example of nearly all states and the general Zeitgeist, but also the conviction that we are acting far more in accordance with justice if we use those estates for the salvation of the state under the conditions mentioned above, than if we intended, to this end, to draw more strongly on the wealth of our loyal subjects. Were it possible to convert our domains quickly enough into cash, the value of the same would be sufficient to meet our obligations without having to make any demands on the financial wealth of our loyal subjects.However, as that is entirely impossible, and since this purpose cannot be fulfilled alone by loans from abroad, even though we have taken measures to utilize this source to whatever extent possible, there is no other choice, if the state is to be saved, then to procure the shortfall in cash from within the land itself.However, we do not wish to demand this –with the exception of a one-time, very moderate tax, payable in several monthly installments, on those who support themselves by the labor of their hand and possess only very small wealth –as an impost, either on wealth or income, but merely as a loan, for the purpose of discharging the indemnity to France, from our domains and ecclesiastical holdings, designated, as already mentioned above, to free the state from its debts. This loan shall draw a proper interest rate of four percent annually, and we will secure its repayment through a special mortgaging of demesne offices and ecclesiastical estates designated for that very purpose, which, moreover, are collectively liable for it and shall carry out the interest payment. Conditions shall be attached to this, by which the volume of state bonds, a third of which will be sold at their nominal value, will be reduced and the value of the remaining ones will be increased, and the loan shall also not be paid all at once, but within two years at semi-annual intervals. [ . . . ]We shall, moreover, direct our steady and greatest care at promoting to the greatest possible extent, by way of every necessary and beneficial regulatory and financial arrangement, the main goal that is so dear to our hearts, establishing the welfare of our loyal subjects. To that end, the next opportunity shall be taken to establish the coinage on a solid footing, just as we intend to give the nation a suitably established representation, both in the provinces and for the whole, whose council we will happily use and in which, in keeping with the our intentions as the ruler of the land, will happily give our loyal subjects the continuous belief that the condition of the state and the finances is improving, and that the sacrifices that are being made to that end are not in vain. In this way, the bond of love and trust between us and our loyal people will become ever stronger. Source: Gesetz-Sammlung für die K?niglichen Preu?ischen Staaten 1810 Law Collection for the Royal Prussian States 1810]. Berlin: Georg Decker 1810,pp. 25-28, 31.Reprinted in Walter Demel and Uwe Puschner, eds., Von der Franz?sischen Revolution bis zum Wiener Kongre? 1789-1815 [From the French Revolution to the Congress of Vienna 1789-1815]. Deutsche Geschichte in Quellen und Darstellung, edited by Rainer A. Müller. Volume 6. Stuttgart: P. Reclam, 1995,pp. 279-85.Translation: Thomas DunlapAppendix 5: To my people (17th March 1813)To My PeopleThere is no need of explaining to my loyal subjects or to any German, the reasons for the war which is about to begin. They lie plainly before the eyes of awakened Europe.We succumbed to the superior force of France. The peace which followed deprived me of my people and, far from bringing us blessings, it inflicted upon us deeper wounds than the war itself, sucking out the very marrow of the country. Our principal fortresses remained in the hand of the enemy, and agriculture, as well as the highly developed industries of our towns, was crippled. The freedom of trade was hampered and thereby the sources of commerce and prosperity cut off. The country was left a prey to the ravages of destitution.I hoped, by the punctilious fulfillment of the engagements I had entered into, to lighten the burdens of my people, and even to convince the French emperor that it would be to his own advantage to leave Prussia her independence. But the purest and best of intentions on my part were of no avail against insolence and faithlessness, and it became only too plain that the emperor's treaties would gradually ruin us even more surely than his wars. The moment is come when we can no longer harbor the slightest illusion as to our situation.Brandenburgers, Prussians, Silesians, Pomeranians, Lithuanians! You know what you have borne for the past seven years; you know the sad fate that awaits you if we do not bring this war to an honorable end. Think of the times gone by, –of the Great Elector, the great Frederick! Remember the blessings for which your forefathers fought under their leadership and which they paid for with their blood,–freedom of conscience, national honor, independence, commerce, industry, learning. Look at the great example of our powerful allies, the Russians; look at the Spaniards the Portuguese. For such objects as these even weaker peoples have gone forth against mightier enemies and returned in triumph. Witness the heroic Swiss and the people of the Netherlands.Great sacrifices will be demanded from every class of the people, for our undertaking is a great one, and the number and resources of our enemies far from insignificant. But would you not rather make these sacrifices for the fatherland and for your own rightful king than for a foreign ruler, who, as he has shown by many examples, will use you and your sons and your uttermost farthing for ends which are nothing to you? Faith in God, perseverance, and the powerful aid of our allies will bring us victory as the reward of our honest efforts. Whatever sacrifices may be required of us as individuals, they will be outweighed by the sacred rights for which we make them, and for which we must fight to a victorious end unless we are willing to cease to be Prussians or Germans.This is the final, the decisive struggle; upon it depends our independence, our prosperity, our existence. There are no other alternatives but an honorable peace or a heroic end. You would willingly face even the latter for honor's sake, for without honor no Prussian or German could live. However, we may confidently await the outcome. God and our own firm purpose will bring victory to our cause and with it an assured and glorious peace and the return of happier times.FREDERICK WILLIAMBreslau, March 17th ,1813 Source of English translation: James Harvey Robinson, Readings in European History, A collection of extracts from the sources chosen with the purpose of illustrating the progress of culture in Western Europe since the German Invasions, Volume II. Boston, New York, Chicago, London: Ginn & Company, 1904-06, pp. 522-23.Source of original German text: Schlesische Priviligirte Zeitung from March 20,1813, no. 34, pp. 1. Reprinted in Walter Demel and Uwe Puschner, eds., Von der Franz?sischen Revolution bis zum Wiener Kongre? 1789-1815[From the French Revolution to the Congress of Vienna, 1789-1815], Deutsche Geschichte in Quellen und Darstellung, edited by Rainer A. Müller, vol.6. Stuttgart: P. Reclam, 1995, pp. 413-16.Appendix 6: Absolute Numbers of Ships calling the Baltic ports (Own extraction from Soundtoll Registers)YearK?nigsbergDanzigLivlandKurlandKolbergnumber of ships17864396961417876411611211117885481881461789528374731790651209213117917216099163179286137130241179356187119363179439150150276179549132123214179674282271315179740134135133179845186121831799562001106418007027822812518017824613314718024024114120318036719217314418048024517320718058933723532518061042225351807513201181180813118091181011181121181263181351137918145288841961815431091567418163877951211817491462221431818521863883961819241333031618203711821115 ................
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